HSBC Securities has lost at least $45 million in its U.S. corporate bond desk trading operations, largely in telecom and Tyco International bonds, say fixed-income officials with knowledge of the situation. This hit, coming after a $15 million loss on the firm's U.S. Treasury desk and feeble bonus payouts for 2001, framed a dire picture for 2002 compensation and has prompted an exodus of senior staff of the corporate bond group over the past several weeks. There are just two people left on the capital markets origination desk, one of which is an associate. The decline in bonuses was particularly disappointing, say the officials, noting that expectations had been raised after the corporate desk turned an estimated $20 million profit in 2001.
Jonathan Kattouf, the telecom, media, and cable trader at the firm, and, according to people familiar with the situation, the trader responsible for the losses, says "I've been on Wall Street for 10 years and I've made it my business never to comment on p & 1 [profit and losses]." Asked about his future, he says "I have no plans to leave (the firm)."
Ferdie Masucci, head of HSBC's corporate bond business, when asked about losses in the neighborhood of $40 million, refused to comment. In respect to personnel, he says the firm is working on re-staffing, and toward that end last week hired Tom Egan, formerly a high-yield telecom analyst from SG Cowen, to replace departed telecom analyst Eli Lapp. Robert Smalley, HSBC corporate bond research head, says Egan's high-yield experience will come in handy, given the distressed state of investment-grade telecom. Masucci also points to the recent hires of Shawn Burke, a utilities analyst (BW, 2/3), and Tim Hartshorn, a trader (BW, 4/14), as evidence that the firm is far from throwing in the towel on its corporate bond business. Pamela Plehn, a firm spokeswoman, declined comment.
The latest defections include Bob Post, the firm's head of investment-grade capital markets, who went to Bear Stearns, and Greg Meredith, a senior executive who had been brought in over a year ago to start a leveraged finance operation which never materialized. Meredith could not be reached. At least four senior salesmen left, though BW learned of several more defections that could not be confirmed at press time. Ed Walsh, former managing director, and Tim Mullins, former senior v.p., have both left the firm's New York sales desk. Bob Giannini and John Pinto, two other senior salesmen, have left HSBC's San Francisco office. The four departed shortly after John Deuschle, its New York head of investment-grade sales, left (BW, 4/15). One official close to the situation says that while he was not aware of any other departures as of late last Wednesday, he quipped, "It's only 20 minutes to five: there's still time."
Walsh and Giannini have both joined First Tennessee Capital Markets: Walsh as a senior v.p. based in New York, and Giannini in Manhattan Beach, Calif. They are the latest of roughly 10 HSBC officials to join FTCM in the last five or six years. Walsh declined comment, other than to confirm that he has joined FTCM. Giannini could not be reached, and Post declined to comment. Mullins has joined Wachovia Securities as a v.p. based in New York. He will report to Chris Huff, the firm's national sales manager. Pinto, a former senior v.p., will join U.S. Bancorp Piper Jaffray, as San Francisco-based managing director, corporate bond sales, reporting to Jim Roddy, Denver-based sales head. Pinto says he will likely start next week. Neither he nor Mullins would discuss the situation at HSBC, nor would they discuss their reasons for leaving.